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Pan-Canadian framework on climate change announced

At the conclusion of the December 9, 2016 meeting of Prime Minister Justin Trudeau and the leaders of Canada’s provinces and territories, the Pan-Canadian Framework on Clean Growth and Climate Change (PCF) was formally announced. The PCF is subtitled “Canada’s Plan to Address Climate Change and Grow the Economy” and is the result of work done over the preceding nine months by four federal-provincial-territorial working groups tasked with consulting with First Nations, businesses and the public and developing options to deal with climate change and enable clean growth.

The result of these efforts is the PCF, an 86-page document endorsed by the federal government, all three territorial governments, but only by eight of the ten provinces. Notably, both Saskatchewan and Manitoba refused to endorse the PCF, but for different reasons. Saskatchewan Premier Brad Wall said he could not commit his province to a system that imposes a tax on carbon emissions, given the important role carbon-based industries play in Saskatchewan and the current dismal economic state of the oil and gas industry. Premier Wall’s position has been consistent since the First Ministers first started discussing climate change options with Prime Minister Trudeau and nothing was put forward in the development of the PCF to convince him to change his mind. It is important to note that he has not stated that Saskatchewan is opposed to cap and trade and the use of offsets.

On the other hand, Manitoba’s stated reason for not backing the PCF is unrelated to climate change. Premier Brian Pallister said his province faces “monumental challenges” with respect to health care that he wants the federal and provincial governments to address, rather than focusing on climate change. He pointed to the fact Manitoba has the largest percentage of indigenous people of any jurisdiction and has serious chronic disease and mental health issues. Premier Pallister said Manitoba’s future support for the PCF is conditional on progress on these issues, including funding transfers from the federal government. Despite its refusal to back the PCF, Manitoba will be making its own climate change plan public in the near future. Alberta had previously indicated it would not support a federal climate change plan but changed its position following Prime Minister Trudeau’s late-November announcement that the federal government would approve two major oil pipeline expansion projects originating in Alberta: Kinder Morgan’s Trans Mountain pipeline to shipping terminals in British Columbia and Enbridge’s Line 3 pipeline to the US Midwest.

Many of the details of the PCF will be rolled out in 2017, however the PCF identifies four main “pillars”: pricing carbon pollution; complimentary measures to further reduce emissions across the economy; measures to adapt to the impacts of climate change and build resilience; and actions to accelerate clean technology innovation and create jobs.

Carbon pricing is intended to be a central component of the PCF and the document includes a “benchmark” for pricing carbon that comprises a number of elements, including a requirement that all jurisdictions have carbon pricing by 2018; pricing will be based on GHG emissions and applied to a common and broad set of sources; jurisdictions can implement a carbon tax/levy like British Columbia and Alberta or a cap and trade system like Ontario and Québec. Jurisdictions with an explicit price-based system will be required to start at a minimum of CA$10 per tonne in 2018 and rise by CA$10 per year to CA$50 per tonne by 2022. Provinces with cap and trade need a 2030 emissions reduction target equal to or greater than Canada’s 30 percent reduction target and must have declining (more stringent) annual caps to at least 2022 that correspond, at a minimum, to the projected emissions reductions resulting from the carbon price in place that year in the price-based systems. Revenues from both types of systems will remain in the province of origin. If a jurisdiction does not have a system in place or its system does not meet these benchmarks, the federal government will “introduce” an explicit price-based system (i.e. carbon tax or levy) that will be consistent with the principles and will return the revenues to the jurisdiction of origin.

Jurisdictions with their own systems will be required to provide “regular, transparent and verifiable” reports on the outcomes and impacts of their respective carbon pricing policies.

Complimentary measures are intended to promote the use of cleaner, more energy efficient technologies to further reduce emissions. Examples of such measures include steps taken in provinces like Alberta and Ontario to phase-out emissions from coal-fired power plants; setting future federal standards for natural gas-fired electricity generation; and implementing increasingly stringent model building codes for new and existing buildings. Other measures will target emissions from the transportation sector including increasingly stringent federal emission standards for light and heavy duty vehicles; a Canada-wide strategy for zero-emission vehicles and enhanced investment in public transit upgrades and expansions.

While much work remains to be done by the various governments to implement the steps set out in the PCF, one aspect has already been flagged as a key short-term indicator of whether the plan is going to have ongoing support from the provinces. An approach to a review of carbon pricing, including “expert assessment of stringency and effectiveness” that compares carbon pricing systems across Canada will be completed by 2022. Prior to that, an interim report will be completed in 2020 which will be reviewed and assessed by the Prime Minister and Premiers. This is intended to allow for an early assessment of approaches and best practices to address the competitiveness of emissions-intensive trade-exposed sectors (e.g. the energy sector). Some observers have noted that this interim report may have been intended to address concerns expressed by some provinces (notably British Columbia) that a comparison will need to be done of the costs to key industry sectors imposed by carbon tax regimes and cap and trade systems before a province’s carbon tax is increased to meet the escalating carbon price required by the federal government. How that analysis will be conducted, and how stringency and effectiveness will be measured and compared among differing schemes, remains to be seen but could prove to be a very important indicator as to whether the consensus reflected in the PCF will continue to hold.